1. Multiple Choice Questions for AQA A-level Economics
Section 4.1
Individuals, Firms, Markets and Market Failure
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4.1.5
Perfect Competition, Imperfectly Competitive Markets and Monopoly Performance H
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2. Perfect Competition, Imperfectly Competitive Markets and Monopoly Performance
Question 1
Which one of the following options shows the correct spectrum of market structures, with the most concentrated on the left and least concentrated on the right?
Market structures are classified in terms of the presence or absence of competition. 
When competition is absent, the market is said to be concentrated. There is a spectrum, from pure monopoly, (on the left) where the market is concentrated on one firm, to perfect competition, where the market concentration is very low (on the right).
More concentrated structure Less concentrated structure
Perfect competition
Monopolistic competition
Oligopoly
Pure monopoly A
Incorrect
Pure monopoly
Oligopoly
Monopolistic competition
Perfect competition B
Correct
Monopolistic competition
Pure monopoly
Oligopoly
Perfect competition C
Incorrect
Oligopoly
Perfect competition
Monopolistic competition
Pure monopoly D
Incorrect
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3. Perfect Competition, Imperfectly Competitive Markets and Monopoly Performance
Question 2
Traditional models of the theory of the firm are based on the assumption that the firm has the objective of…
profit satisficing.
Incorrect
Whilst all of the options are potential objectives of a firm in the real world, neoclassical models of the theory of the firm are based on the assumption that the firm has the objective of profit maximisation
sales revenue maximisation.
Incorrect
maximising the quality of the output.
Incorrect
profit maximisation.
Correct
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4. Perfect Competition, Imperfectly Competitive Markets and Monopoly Performance
Question 3
The diagram below shows the marginal cost (MC), average cost (AC), marginal revenue (MR) and average revenue (AR) curves of a firm. If the firm has the objective of profit maximisation, what will their level of output be? OA
Correct OB
Incorrect
The firm will maximise profits at the level of output where MC = MR. OC
Incorrect OD
Incorrect
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5. Perfect Competition, Imperfectly Competitive Markets and Monopoly Performance
Question 4
Which one of the following summarises the ‘principal agent’ problem?
Owners of a firm acting in their own best interest rather than the best interest of society
Incorrect
The principal agent problem occurs when there is a divorce between the ownership and control of a firm. This means the managers, who control the day to day activity of the firm, may give greater priority to their own objectives rather than those of the owner.
Shareholders of a firm acting in their own best interest rather than the best interest of their customers
Incorrect
Managers of a firm acting in their own best interest rather than the best interest of the owners
Correct
Managers of a firm acting in their own best interest rather than the best interest of their suppliers
Incorrect
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6. Perfect Competition, Imperfectly Competitive Markets and Monopoly Performance
Question 5
Which one of the following is a factor used to distinguish between different market structures?
The degree of product differentiation
Correct
Product differentiation refers to a situation where there are generally similar products with minor variations that are used by consumers when making a choice. In the structure of perfect competition, for example, there is no product differentiation whereas under monopolistic competition a distinguishing feature is the high degree of product differentiation in the market.
The number of employees
Incorrect
The degree of efficiency
Incorrect
The sector of industry
Incorrect
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